300,000 families have no bank account

MORE than 300,000 households do not have a bank account, with 750,000 families unable to save on a regular basis, according to a report by a Government-backed think-tank.

The study by the Economic and Social Research Institute also shows 465,000 households don’t have access to many basic financial services such as credit cards, overdraft facilities and other loans.

The report, which examines the rising level of financial exclusion and over-indebtedness in the Republic, revealed that 5.4% of households — an estimated 81,000 families — are persistently unable to meet essential living expenses and debt repayments.

More than 40% of over-indebted households reported a major drop in income over the previous 12 months. The research which was commissioned by the Department of Community, Equality and Gaeltacht Affairs also shows that:

* 31% of households have no access to credit facilities.

* 51% are unable to put money aside for savings.

* 27% have no home insurance cover.

The ESRI said 20% of all households in the Republic in 2008 did not have a current account with a bank, although it estimates that half of these were individuals who simply prefer to deal in cash

Nevertheless, the ESRI said the scale of the problem of banking exclusion in Ireland is considerably worse than in most EU countries with levels almost three times higher than the average of the EU-15.

Not surprisingly, the ESRI said there was a clear pattern of financial exclusion among the more vulnerable groups in society with low income levels one of the main contributory factors.

One of the report’s co-authors, Professor Helen Russell, said the problem of over-indebtedness was particularly noticeable among young adults.

“There is no real evidence of people overspending or overborrowing. The issue is very much connected with low income,” said Prof Russell.

The report comments: “While indebtedness in itself is not problematic, the unprecedented growth in personal debt in Ireland in recent years is a cause for concern since it is now coupled with severe economic recession, high levels of job loss and significant cuts in household income.”

Ireland also has the second highest level of mortgage and rent arrears in Europe, while arrears on utility bills and other loan repayments are also above the EU average.

Recent figures published by the Central Bank showed 44,508 mortgage holders – 5.7% of the total – were in arrears by at least 90 days.

The ESRI report reveals:

* 7.5% of households are in arrears on utility (gas, electricity, telephone) bills

* 4.9% are overdrawn on bank accounts due to financial difficulties

* 9% are unable to pay their credit card balance.

Prof Russell said the situation was likely to have worsened since 2008 and there was growing concern that an increasing number of households would be unable to repay their debts due to rising unemployment, falling income and the collapse of the housing bubble.